Feds to forgo $140-million in booked savings as they try to fix pay problems

Federal civil servants will be reimbursed for hiring tax accountants to sort through their pay problems and departments will be allowed to re-hire laid-off payroll employees, the federal government said Thursday as it tried to bail out its sinking Phoenix pay system.

A high-powered cabinet committee is also being created to fix the pay process, although a statement from the Prime Minister's Office didn't provide a deadline for achieving that goal.

In announcing the measures, the government acknowledged it will have to forgo $$140-million it expected to save over the next two years from implementing the new electronic payroll system – and that it could take that long to finally resolve all of the pay issues.

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A cabinet working group, led by Public Safety Minister Ralph Goodale, will work to bring Phoenix to a so-called "steady state," Prime Minister Justin Trudeau said in a statement.

The group includes Finance Minister Bill Morneau, Treasury Board President Scott Brison, Ottawa-area MP and Environment Minister Catherine McKenna and Natural Resources Minister Jim Carr, who is also currently the acting minister of Public Services and Procurement.

"This working group will bolster the actions we have already taken and ensure that we fulfil our commitment to the public service to fix the issues that have impacted employees," Trudeau said in his statement.

As tens of thousands of improperly paid civil servants face a tax filing deadline this weekend, they are being assured that any costs they incur as a result of pay issues will be covered.

"Employees who encountered Phoenix pay issues may seek up to $200 in reimbursement for tax advisory services in relation to their 2016 or 2017 income taxes," the Treasury Board Secretariat said.

That amount could go higher if government workers can provide receipts for tax services in excess of $200, a government source said.

The government began sending income tax slips to its over 290,000 employees across 98 federal organizations in the last month.

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But as many as 50,000 of those tax slips had to be reissued for 2016 because of Phoenix-related problems.

The pay problems began shortly after the new system was launched nearly 15 months ago, initially affecting 82,000 civil servants who were either underpaid, overpaid or not paid at all – in some cases for months.

But as of April 5, the department overseeing the pay system said pay transactions still needing to be processed stagnated at 284,000 from the previous month, with no end in sight to the problems.

Trudeau has acknowledged the hardship faced by many civil servants, but, until recently, has accused the previous Conservative government of setting the pay modernization program up to fail by cutting corners on training and eliminating payroll system jobs.

The Conservatives have fired back, saying the Liberal government could have delayed bringing Phoenix online when problems were initially detected.

"The Liberals launched Phoenix knowing that it wasn't ready and now it's going to cost taxpayers hundreds of millions of dollars to fix their mistakes," said Kelly McCauley, the Conservative deputy critic for Public Services and Procurement.

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"It's been over a year and the prime minister's only solution is a ministerial discussion group. Employees who are on the verge of losing their homes, being forced to postpone their educations, or going into debt because they are not being paid properly cannot wait two more years."

Unions representing federal workers applauded Thursday's announcements, but remained skeptical of an early solution to the debacle.

"It demonstrates the prime minister is finally taking this seriously," said Debi Daviau, president of the Professional Institute of the Public Service of Canada, which represents about 50,000 scientists and other professionals employed by Ottawa.

Daviau said she hoped departments would use the reallocated $140-million to hire not only pay system advisers, but also the IT professionals needed to back up government pay and other computerized systems.

Under the government's plan, money that had originally been earmarked as savings from Phoenix will be diverted to departments. Officials in those departments can use the funds to cover pay system-related costs, which could include hiring more staff.

But the government may have a hard time finding qualified payroll system employees to hire, should departments decide to go that route, said Robyn Benson, national president of the Public Service Alliance of Canada.

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Last summer, when the problems with Phoenix were escalating, the government issued a call to retired and laid-off pay system employees to come back to work temporarily at the federal pay centre in Miramichi, N.B., or at one of five satellite offices set up across the country.

Some returned to their old jobs, but many had already found other employment or decided to not go back.

"I'm not so sure that there's many more that are going to come back," said Benson.

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